Three Rivers District Council v Governor and Company of Bank of England

Date01 March 2001
Published date01 March 2001
AuthorSteyn LJ,Hope LJ,Hutton LJ,Hobhouse LJ,Millett LJ
Subject MatterAccounting & finance
Journal of Financial Regulation and Compliance Volume 9 Number 3
House of Lords clears way for action against
Bank of England
Three Rivers District Council v Governor and
Company of Bank of England
Steyn LJ, Hope LJ, Hutton LJ, Hobhouse LJ and Millett LJ
Date of judgment: 22nd March, 2001
The various pre-trial stages of these com-
plex proceedings have been discussed in
previous issues of this Journal in Vol. 5,
1, pp. 70-72, Vol. 7, No. 3, pp. 274-
Vol. 8, No. 4, pp. 359-364 and the
factual background explained. Depositors
in the UK branch of BCCISA (part of the
Bank of Credit and Commerce Interna-
tional group which collapsed in 1991 leav-
ing large scale losses) had brought actions
for damages in respect of their uncompen-
sated losses against the Bank of England
(the Bank) in relation to its discharge of its
statutory functions under the Banking Act
They argued (1) that the Bank's
licensing as a deposit-taker and subsequent
supervision of BCCI amounted to misfea-
sance in public office and/or (2) that they
had, under European law, enforceable
rights against the Bank conferred on them
by the First Council Banking Co-ordina-
tion Directive (77/780/EEC) which the
Banking Act 1979 implemented in the UK.
In May, 2000 the House of Lords defini-
tively settled as a matter of law the second
ground of the claimants' argument ruling
that the European Directive in question did
not have the effect of conferring rights in
damages against the Bank on the deposi-
In the same judgment the House of
Lords ruled as a matter of law that the
essential elements of the tort of misfeasance
in public office (which by this stage is the
only possible legal ground of claim avail-
able to the depositors) were to be found
'where a public officer acts knowing that
he has no power to do the act complained
of and that the act will probably injure the
It involves bad faith inasmuch
as that the public officer did not have an
honest belief that his act was lawful' (per
Lord Steyn, House of Lords judgment of
18th May, 2000 in these proceedings). This
'reckless indifference' which must be
proven to exist for a claim against the
Bank to succeed must be judged in a sub-
jective sense, their Lordships ruled last year,
so that the depositor claimants needed to
show knowledge on the part of the Bank
that the decision of the Bank would prob-
ably damage the Appellants. The question
of whether or not the facts pleaded by the
claimants reveal a sustainable cause of
action against the Bank or whether, as the
Bank had argued throughout, they did not
and the action ought to be struck out with-
out proceeding to full trial was referred to
another House of Lords hearing. It was
from that subsequent hearing on whether
or not the claim should be allowed to pro-
ceed to full trial of the substantive issue of
the Bank of England's alleged liability that
this decision was made.
Journal of Financial Regulation
and Compliance, Vol. 9, No. 3,
2001, pp. 279-283
Henry Stewart Publications,
Page 279

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